So the last couple weeks I went on a bit of a binge focusing on the idea of disparities. My operational definition of the word is a difference in access or achievement that is not based on merit – not based on a person’s innate skills or talent that enable them to do something. I spoke first about gender disparities and how they might be hurting everyone. Then I looked at the origins of racial disparities, as well as how those disparities can persist across generations. I realize though that all of those articles I started with the presumption that you, my esteemed readers, agreed that disparities exist. While this is more than likely true, it is still sloppy blogging (if such a phrase makes any sense at all).
Luckily for me, I didn’t have to wait long for some hot-off-the-presses evidence pointing to not only the existence, but the magnitude of racial wealth disparities in the United States:
The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009. These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.
The Pew Research analysis finds that, in percentage terms, the bursting of the housing market bubble in 2006 and the recession that followed from late 2007 to mid-2009 took a far greater toll on the wealth of minorities than whites. From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53% among black households, compared with just 16% among white households.
So we’ve known about this particular disparity for a while. Black home ownership was at its highest level ever right before the crash. Reports starting coming in of so-called “predatory lending” wherein people whose credit didn’t qualify them for a home loan were targeted for sub-prime mortgages. The banks figured they could make money off of debt defaults, but it turns out you can’t actually just conjure money out of thin air and the whole thing (read: the economy) fell apart.
During the aftermath of all this, it became suggested that black first-time home owners were particularly targeted for these loans, even those whose credit was good enough for a regular mortgage. People who I trust to know about these things were saying that lenders were looking specifically for black borrowers, as they ‘fit the profile’. We may never know the extent to which systemic (and perhaps some overt) racism led to the preferential treatment ‘enjoyed’ by black borrowers, but we can be sure that they were disproportionately screwed over when the bubble burst.
Here’s the thing about home ownership: it’s the first way to build wealth. Wealth does not refer to simply how much income one has; rather, wealth refers to the ability of your money to work for itself. Someone who rents (like myself) must pay the cost of living in the home, and that money disappears and is gone. If you own the home you live in, you may still have to pay the mortgage each month, but most of that is money that you are paying yourself. As a result, your home accumulates its value as you pay off the loan (‘equity’). As you make improvements to the home, its resale value increases. This is not the case when you rent, so in a way your home generates money for you.
So if you start with a group that already has lower-than-average home ownership to begin with, and then loan them poisoned assets so that even those that could afford homes get screwed when the man behind the curtain is exposed, you make the disparity even wider. Add to that the fact that black families living in ‘black neighbourhoods’ being disproportionately loaned to means that the values of those neighbourhoods goes down more than in white neighbourhoods. This has a ripple effect to those black families who already owned their homes as the prices plummeted. Not only was the wealth of those who had made “bad decisions” (read: who were bamboozled by indecipherable contracts that not even the lenders fully understood) erased, but so too was the wealth of those who had played by the rules.
This happened everywhere, not just in black neighbourhoods. However, what this meant is that the people who were given those corrosive loans at a higher rate (black and brown people) were disproportionately affected by the bubble bursting. Whereas white communities insulated the victims of this loan fraud (as a result of low volumes of bad loans), the rush of bankruptcies and foreclosures destroyed black communities. The resulting wealth split made the problem of disparities even worse. Much worse than it has been in a long time:
So whether or not you believe that it was intentional malice or just an ‘accident’ of systemic racism, we see that predatory lending patterns has created a reality in which black and brown people saw their wealth, built up over generations, destroyed in the twinkling of an eye. Not because of laziness, not because of genetic inferiority, not because they didn’t have the work ethic to stop waiting for a government handout, but as the direct result of racism. Not the overt racism of their parents’ day, but the racism that I try my best to describe to you on these pages.
Anyone who would like to dispute whether or not racism is still a relevant problem in today’s “post-racial” society, or who thinks that the problems plaguing black people aren’t due to prejudicial attitudes about their skin colour, or who thinks that “individual responsibility” is the key to understanding the different realities faced by members of racial minority groups and the majority group… those people are now invited to suck it.
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